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On Tuesday, Citigroup issued a report that lowered its expectations for iron ore prices, saying that the price of such commodities would briefly fall into the $50 range per ton in 2015.
Shen Meng, executive director of Shannon Capital, said in an interview with Securities Daily that the possibility of falling iron ore prices to $50 is debatable. "If iron ore prices fall to $50 a ton next year, the three major mines In terms of business, the profit margin of overseas miners will be greatly reduced, and miners may reduce their production capacity."
However, the profit level of domestic steel enterprises may be affected by this. Zhang Lin, an analyst at Lange Steel Network, said that “steel enterprises’ profits may only remain at a slight increaseâ€. In the eyes of the industry, the problems faced by domestic steel companies are far more than that.
Overseas miners will not let the mine price fall
Our reporter found that the spot price of iron ore has dropped from 160 US dollars per ton in early 2013 to 75 US dollars today, with a decline of 53.12%. While prices continue to fall, iron ore production remains high. Rio Tinto's iron ore output in the third quarter was 60.45 million tons, a record high in the historical quarter. In the third quarter, Vale's iron ore output reached 85.73 million tons, a record high in the same period.
It is worth mentioning that the iron ore mining cost of the world's largest iron ore producers such as Rio Tinto, BHP Billiton and Vale is only US$20 to US$40 per ton, plus Shanghai freight, and the total cost is US$40 per ton. 60 dollars.
The overseas miners still have the meaning of “Tian Chai plus fireâ€. Walsh said that Rio Tinto’s production cost in the first half of 2014 was US$20.4 per ton, which is the lowest in the industry. The company will not be afraid of this price storm. Walsh also said the company is confident that it will increase shareholder returns when it announces its annual results in February.
Shen Meng explained that the miners' giants have expressed their stance that they want to use the confidence of the miners to pump up the entire steel market, but if they continue to expand production, they will fall into a vicious circle. Citigroup analysts wrote in the research report that the bank now believes that iron ore prices will have an average price of $74 per ton in the first quarter of 2015, and the average price will fall to one ton by the third quarter. 60 dollars.
In the context of continued low cost, it is also a concern for domestic steel companies to raise their profit levels.
Lange Steel Network analyst Zhang Lin told reporters that if the profit of steel enterprises wants to achieve real quality improvement, the raw material cost will not fall enough, and whether the order can be increased is also an important factor. "The steel cost is even low, there is no sales. In Zhang Lin’s view, the fourth quarter has been regarded as the off-season of steel. Under the premise that demand is difficult to rise, the profits of steel enterprises are still not optimistic. “In the off-season, the downstream purchase volume will continue to decrease. The steel price is close to the bottom of the crucible, and there is no anti-pumping action, but the big climate will not be formed. The contradiction between supply and demand still exists, and the steel price will remain under pressure overall."
Steel companies are facing the impact of overseas counterparts
The data shows that in the first three quarters, the domestic key statistical steel enterprises realized sales income of 2.7172 trillion yuan, down 0.22% year-on-year, and realized profits of 19.282 billion yuan, an increase of 71.26%. However, it is necessary to face up to the fact that the current steel industry's sales profit is only 0.67%. Although it has improved to a certain extent compared with last year's 0.34%, last year's benefits basically came from the price reduction of coal. This year's profit mainly comes from imported iron. The price of ore has fallen sharply.
When the price of iron ore remains high, the high cost price has become the biggest reason for the sluggish profit of domestic steel enterprises. Now that the price of iron ore has fallen, the domestic steel enterprises are still in full swing, showing domestic steel. The need for enterprises to re-examine themselves is that when the cost of raw materials has fallen to a very low level, the profits of steel companies are still difficult to pick up.
Shen Meng believes that if the attention and energy of domestic steel enterprises are still in the low-end products, domestic domestic steel enterprises may even face the impact of overseas steel enterprises. "Now the domestic high-speed rail and automotive industry steel still relies on imports. Mainly, the reason is that the domestic steel products with high added value are still in a state of stagnation and immaturity. Now some foreign steel enterprises have achieved transformation and upgrading, and the product level has been significantly improved, while domestic steel Enterprises still know what to expect. In the future, if foreign advanced steel companies enter China, they will be equivalent to 'wolves are coming' to the domestic steel industry. Many steel companies with backward products will be forced to withdraw from the steel stage."
Abstract Recently, iron ore giant Rio Tinto CEO Walsh said Rio Tinto for iron ore prices is not worried, the company will maintain plans to increase production. “Between Rio Tinto and current iron ore prices, there are also secondary, tertiary and tertiary producers. Our production costs are...
A few days ago, iron ore giant Rio Tinto CEO Walsh said that Rio Tinto is not worried about the fall in iron ore prices, the company will maintain a production increase plan. “Between Rio Tinto and current iron ore prices, there are also Tier 2, Tier 3 and Tier 4 producers. Our production costs are the lowest in the world, so I don’t think our iron ore business will make me sleepless.†Walsh said.